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WHATEVER YOU DO, DON'T IGNORE THIS!!! I made that mistake and ended up owing waaaaay more in penalties. Deal with it now, future you will thank present you.
Pro tip: if you can, go to a local IRS office in person. Sometimes its easier to get things sorted face-to-face.
This! I did this and got my issue resolved in one visit. Saved me so much time and headache.
Anyone else feel like the whole tax system needs a complete overhaul? It's 2023, why are we still dealing with this archaic bs?
Preach! π The system is so broken, it's not even funny anymore.
For real. Other countries have it figured out. Why can't we?
Everyone's talking about whether the IRS will notice, but nobody's mentioned the statute of limitations. The IRS generally has 3 years from the filing date to audit your return (with some exceptions like fraud). So technically, they could "reject" (audit) your return years later. But for a minor discrepancy like yours, they'd typically just send a CP2000 notice (automated underreporter notice) if they catch the mismatch between your reported student loan interest and what the lender reported. You'd owe the tax difference plus maybe some interest, but probably no penalties for something that small and unintentional.
Thanks for mentioning the 3 year thing - that's actually making me more anxious lol. But good to know about the CP2000 notice. Is that something that would affect my credit score or anything?
Life pro tip: Always wait until the last minute to file your taxes so you have all your documents! I never file before April 1st to make sure I have all those corrected forms that companies love to send late. Too late for you this year but remember for next time. Student loan companies and investment firms are notorious for sending corrections.
Great advice except when you're expecting a refund! I filed in early February and got my refund 9 days later. Waiting till April would've meant two more months without that money. There's always a tradeoff.
Based on your cousin's situation, I'd definitely go with an Enrolled Agent who specializes in back tax filings and IRS representation. Here's why: 1) The unfiled returns need someone who knows the IRS procedures inside and out 2) The unreported real estate sale has potential capital gains implications 3) Missing W-2s/1099s requires someone familiar with IRS wage and income transcript requests When I was behind on taxes (not 10 years, but 3), I interviewed both a CPA and an EA. The CPA was more expensive and seemed less comfortable with the IRS negotiation part. The EA I ended up hiring had previously worked for the IRS for 15 years and knew exactly how to handle everything. The EA was able to get penalties reduced through a first-time abatement request and set up a reasonable payment plan. Make sure whoever your cousin hires has specific experience with tax resolution and IRS collections, not just routine tax preparation.
Did your EA help you get any of the penalties removed? I'm wondering if the 'first time abatement' thing works if you've ignored filing for many years.
Yes, I got the failure-to-file and failure-to-pay penalties removed for the first year through First Time Abatement (FTA). For the other years, my EA negotiated reduced penalties based on reasonable cause (I had medical issues). The First Time Abatement typically only works for one tax year, and you generally need to have a clean compliance record for the 3 years before that. For someone who hasn't filed in 10+ years, they might not qualify for FTA right away, but after they get into compliance, they might qualify for the most recent year. My EA also helped me request Currently Not Collectible status temporarily when I was between jobs, which paused all collection activities. The key was having someone who knew what relief options were available and how to properly request them.
Just wanna add something important that nobody's mentioned yet. When your cousin starts filing those old returns, they should NOT use the current year's tax forms! Each year needs to be filed using that specific year's tax forms because tax laws change. I made this mistake when catching up on 3 years of unfiled taxes. I printed the most recent forms thinking they were all the same and had to redo everything. Each tax year has different rules, deductions, credits, and rates. An EA or CPA will know this, but if your cousin tries to DIY any of this, they need to use the correct year's forms which can be found on the IRS website's prior year forms section.
This is super important advice! I work at a tax office (not a professional, just admin) and people come in ALL THE TIME with self-prepared returns using the wrong year's forms. The tax code changes almost every year in some way.
Do you know if tax software handles this automatically? Like if I buy the 2025 version of TurboTax, can I use it to file my 2022 return that I never did?
CosmosCaptain
lol welcome to bureaucracy hell. grab a seat, you'll be here a while π
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Freya Johansen
Has anyone else noticed that the IRS systems seem to be getting worse every year? I swear it used to be easier to deal with this stuff.
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Omar Fawzi
β’For real! Its like they're stuck in the 90s or something. Get with the times, IRS!
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Chloe Wilson
β’Tbf, they are massively underfunded. Can't upgrade systems without $$$
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